Friday, November 02, 2007

Slowly and Gradually the Poor World Develops

John B. Chilton writes (31 October)in The Emirates Economist Blog (economic analysis of events in the United Arab Emirates and the Gulf) (here):

“In praise of sweatshops: Oldie but goodie”, quoting Paul Krugman, New York Times:

“On the opponents of globalization:

When the movement gets what it wants, the effects are often startlingly malign. For example, could anything be worse than having children work in sweatshops? Alas, yes. In 1993, child workers in Bangladesh were found to be producing clothing for Wal-Mart, and Senator Tom Harkin proposed legislation banning imports from countries employing underage workers. The direct result was that Bangladeshi textile factories stopped employing children. But did the children go back to school? Did they return to happy homes? Not according to Oxfam, which found that the displaced child workers ended up in even worse jobs, or on the streets — and that a significant number were forced into prostitution.

The point is that third-world countries aren't poor because their export workers earn low wages; it's the other way around. Because the countries are poor, even what look to us like bad jobs at bad wages are almost always much better than the alternatives.”

CommentThese are the stark consequences of exporting Developed Countries welfare standards to developing economies.

Similar stories abound of, for example, Vietnamese women working in factories for 12 hours a day when the only alternative is for them to work 18-days in the fields in the agriculture sector. The women concerned express hostility to foreigners’ ideas of what is proper for them in their circumstances, especially as none of the foreigners know about working the fields.

Adam Smith is sometimes chastised by the ‘left’ for not protesting at the employment of child labour in the 18th century. Children from 6-years old could add to the family gross income by a few pence a day, which added to the labourer’s income was the difference between starving below subsistence or surviving at subsistence. The difference was stark.

Coming from a family of 19th-century coal miners in Kilwinning, Ayrshire, I am very aware of what that life must have meant to my great-great grandfather’s family, including his wife and children. His sons were sent down to pit to move coal and, later, to mine it. My great grandfather went down the pit, so did my grandfather. His only son died in infancy and two of his daughters survived, one to work in clothing factories and the other (my mother) to start as a typist.

In those years between living in a Scottish mining community and a career in a clothing factory and an office, the economy had grown significantly, as had the per capita income of those who worked for wages, a process that continued through their lifetimes (and now ours).

Adam Smith saw the growth of the commercial economy, slowly and gradually, as the only realistic route out of poverty. Sure it would make the rich richer, living in large houses with a score of household staff (my grandmother was ‘in service’ for one such family in the highlands of Scotland), and experiencing the new commodities of motor cars (my father’s grand father was a chauffer for one such family; my father a motor mechanic for the new market in cars), telephones, heating, oil and then electric lamps, gas cookers and baths, and so on.

But progress to opulence, in Adam Smith’s thinking, would bring these real benefits to the majority of the labouring ‘orders’ (the bulk of the population) and raise them and their children accordingly. It did so for my family history and for millions of others. It took time, true, and might have been speeded up except for the continuing mercantile political economy that dominated British government policies before and since Adam Smith’s day. But it happened and we reap the benefits.

I think we ought to look at development in the poorer world in much the same way. Stopping labourers’ families taking jobs at lower wages than are paid in Chicago, Boston, Los Angeles, London, Edinburgh and most points outside the developing world is sentencing them to the only (appalling) alternatives that are available. Those thinking that development is too slow should reflect on their alternatives – compared to what?

On the point in the quotation, I agree with Paul Krugman.

Thanks to ‘Netsmith’ in Blog Review 406 on the Adam Smith Institute Blog here for drawing my attention to his post.